Non-Conformist Budgeting Tricks That Can Help You!
August 26, 2009 – 11:28 amThe budgeting process needs to be customized to each person or family, because what works well for some people would be a complete disaster for others. As a numbers geek I’ve tried a bunch of different budgeting processes and products, and I’ve settled on a process that works pretty well for my family.
1. Our budget doesn’t start in January. The first different from most people is that our budget doesn’t start in January. It starts the second week of march each year. The benefits of starting in march for me are twofold. First of all, I like having the Christmas holidays at a time other than the exact end of the year. This makes after Christmas purchases easier to handle, and it doesn’t necessary start us off on a bad foot if we spend quite a bit at that time of year.
Secondly, and more importantly, the second week of March is convenient for me from a pay perspective. In my current job I’m bonus eligible, and our bonuses (if any) are paid out the first week of March. Therefore a budget year that starts AFTER my bonus is received help me in two ways. The first is that I don’t put the potential bonus money in the budget. After all, it could be large, small, or zero. Secondly, by the time my bonus is paid my wife and I have already created the budget for the next year. Therefore psychologically we don’t even think of including those funds in the budget and can therefore save them immediately.
2. We don’t budget on months, we budget on 4-week periods. I get paid every 2 weeks, so budgeting each month doesn’t work well for me because I receive 26 checks but have only 12 months. Therefore we budget based on 4-week periods, which is for the most part easier to track. My manufacturing companies do this as well. Their budget year is 13 periods rather than 12 months, and it makes comparing the periods easier because each period is of equal length.
The only problem with budgeting this way is that you’ll have one “skip month” a year on your monthly bills. For example, my budget has 13 periods but I pay my electricity 12 times a year (once a month). Therefore once a year I have a “bill skip”, which is an unexpected period where my electricity bill is zero. I use and excel spreadsheet to track my budget, and I built it so it takes this into account. Actually my budget spreadsheet also forecasts the full year by period, so I can tell for each bill when I’ll have a skip so I can plan accordingly.
Alternatively if you get paid every two weeks but choose to keep a monthly budget I would recommend that (if possible) you plan your income based on 24 checks a year rather than 26 checks a year. This would be a great way to save 2 checks a year, which is 2/26 = 7.7% of your income, and you’d never miss it. All you need to do is take the third check you receive in a month and invest it/save it.
3. Most people probably do this one in some fashion, but my wife and I also have a group of spending categories that we track as “infrequent expenses”. Things like clothing, for example, don’t have transactions every month. If we used an envelope system I suppose these funds would just continue to accumulate in an envelope until we went shopping for clothes. Since we don’t use an envelope system, however, we keep a close eye on these categories each month to ensure we’re not overspend what we’ve acrued each month. This also helps for some of our bigger categories that are infrequent, like gifts, auto repairs, and vacations. I’d rather not have that much cash sitting around in an envelope myself, but the envelope system does work very well for the vast majority of people in my opinion.
Do you have any budgeting quirks or customized processes that work well for you? If so please post a comment and share them! Thanks!
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One Response to “Non-Conformist Budgeting Tricks That Can Help You!”
I have 2 accounts for budgeting. Money Flows in one main account, and I transfer on line to other Bill Paying account just for monthly, quarterly bills. There is usually money left in the flow account. At the end of the month I transfer it all to my savings. Then it starts all over again. I don’t spend mindlessly because it will be a savings for vacation, furniture or new car or whatever happens! I love it! No work, no brainer, no Worries. Complete freedom.
By MARJORY on Oct 4, 2009